Santa Paula: Special Meeting Fire Department Funding

By Sheryl Hamlin

At the April 29, 2016 Special Council Meeting, the only item on the agenda was the presentation of a special report commissioned in January 2016 to analyze options for funding the Fire Department. This was a contentious meeting due to the $50,000 cost of the study.

The City Manager wrote an RFP (Request for Proposal) which was won by Matrix Consulting. According to Mr. Robert Finn, Matrix has produced 200 such reports, of which he has participated in 100. When reading the generic nature of many of the sections of the Santa Paula report, it must be realized that these previous consulting contracts allow Matrix to leverage that work. Mr. Finn presented the first draft of the report at the meeting. The report may be downloaded here.

The three major component areas of the report are shown here:

three_components

Under Revenue Production Analysis, the consultants considered the potential of charging for excessive fire and safety calls, but after analyzing the calls, determined that this would yield little revenue. Mr. Finn suggested that the “big box stores” which will come to East Area II will bring added taxable sales to the city, which when increased by a new tax directed for fire would pay for the department. However, there were no projections into the future. The report presented one chart showing Fire Department salaries at the current time as shown below:

current_compensation

What is significant about this chart is the Benefit Rate column which averages 67.52%. This means that for every $1,000 spent on Fire Fighter salaries, there is an additional 67.52% in benefits. Now, it is known that the rate of benefits has increased dramatically. Unfortunately, there were no simulations showing what a hypothetical 5% annual increase in benefits might look like along with a hypothetical 3% salary increase to look into the future.

The chart below provides shows benefits increasing at 5% and salaries increasing at 3% annually, using a weighted average of $61,565 in the salary column and 67.22% in the benefit column.

hypothetical_increase

With a 5% annual increase in benefits, by Year + 10 the benefit rate will exceed the salary. Other than a quiet reference by Council Member Gherardi to “the elephant in the room”, meaning labor issues, was this benefit rate even addressed.

The offsetting income to the Benefit Rate is theoretically the increase to the sales tax base from East Area II, but there was no attempt to simulate this or forecast this sales tax increase in the consultant’s report. In other words, there was no analysis to determine future sustainability.

In three charts, the consultant showed cost decreases (savings) to the city as follows:

Staffing Costs Using Only Reserve Firefighters   … ($483,912)

Current vs. Single FT and Single Reserve Station … ($840,616)

Cost of Utilizing Part-Time Firefighter                    … ($500,866)

Several of the citizens who spoke in Public Comments asked the Council about their plans for the above referenced savings, particularly considering that Santa Paula has a crime problem and not a “house burning down” problem.

In what was perhaps the most significant question of the evening, Vice Mayor Crosswhite asked if the consultant had taken into consideration the Safer Grant of $900,000 for two years. He had not subtracted this out of the analysis, so the saving would net to zero when the effects of the Safer Grant were removed. Nothing would be available to the other departments after making any of these changes, except to exist without the Safer Grant, which is obviously significant, but does nothing for the General Fund.

There was discussion about contracting with the county or annexation into the county fire district. Both have pitfalls. Council Member Gherardi caught an item missing from the report which was the potential of revenue gained from selling the station and equipment. She also expressed concern that the numbers used for the county bids were base rate and not negotiated. Mayor Hernandez said that the county uses full cost recovery so he would doubt if there was room for negotiation.

Mayor Hernandez expressed favor with the report. The council voted to continue the discussion and asked for more specifics.

To watch the entire video, click here.

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For more information about the author, visit sheryhamlin.com

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Chris Mahon

Sheryl, thank you for helping make my point. The problem with a cursory comparison of budget numbers is you miss important facts, like the fact that during the same 2011-2015 time period SP Fire restored full-time firefighters by adding 5 full-time positions under the SAFER grant, a 25% increase in full-time positions.

When you do the math (as you suggested) you need to factor that in. You don’t want to give people the false impression that individual benefits went up that much, because of course they didn’t. More importantly you can’t use the percentage you generated from those raw budget numbers to predict future increases because its based on a false premise.

As for MY benefits costs, they didn’t go up by anything close to 49,880 either. Again, not accounted for are several changes that occurred with my own employer including a restructuring of both benefits and accounting practices. The most we saw was a VERY modest increase in the contribution to our medical plan. I know what I get and it isn’t what you and “Transparent California say it is.

Transparent California isn’t exactly a credible source, which is why serious negotiations teams from both sides don’t use their numbers. I’d urge you to investigate Transparent California’s sponsors and to dig a little deeper for more accurate information.

I’d be happy to discuss any of these points with you at any time.

Sheryl Hamlin

Chris, from the Santa Paula Adapted Budget for FY15-16, the Fire Department ranges from $1.094 million in 2011 for salaries to $1.325 million in 2015. Benefits start at $734K in 2011 and grow to $1.073 million in 2015. Clearly both are increasing. You do the math. This is what governments are trying to address: growth of salaries and benefits that exceed the growth of revenue. I see from transparentcalifornia dot com, that your own benefits package increased by $49,880 since 2011, which is more than most people earn in the county. Although not relevant to Santa Paula directly, this benefits growth is representative of the challenges facing cities and counties in an era of slow growth.

Chris Mahon

I have to take issue with the salaries and benefits projections creted by this reporter. The benefits and salaries cost projections are anything but conservative. Projected general fund revenue growth doesn’t and hasn’t translated into increased salaries. Also there is no historical data that suggests benefits costs would rise at anything like whats assumed in the table. For anybody that knows government finances projecting salary and benefits increases based on any fixed percentage just doesn’t work. doing it over a 10-year period guarantees you will be wrong in the end. The numbers provided amount to almost pure speculation. I think somebody got bad information.

Sh

Sorry, Nick, I did not make this clear. The Matrix report had no forecasts, so did not provide future scenarios for planning purposes. My chart takes the current point in time, which was taken from the Matrix report, and projects a departmental growth of 3% which includes new hires and salaries. The finance director presented a chart in the most recent audited financials showing a 4% growth for the last five years overall in General Fund salaries, so this estimate was conservative. The benefits growth estimate I used were slightly lower too than reported. The council needs to understand expense growth in order to find revenue to pay for growing expenses. This is a budget exercise that must be done annually, as was suggested by a previous consultant, Dr. Gardner, but to my knowledge has not been done. Thanks for reading.

Nick Bacigalupo

Why did you include a salary/ benefit chart that was not in the actual report? The assumption of a 3% annual salary increase is unsupported by the factual reality. In the past 9 years there has literally been a 1 time 2% increase. There is little, if no evidence that a sudden increase in annual salary increases will magically begin.